Prepared remarks: Bank On Colorado Financial Inclusion Summit (July 25, 2023)

The Moment for Financial Inclusion

Welcome and thank you for joining us today to explore financial inclusion in Colorado. I am so pleased that we have brought together such a diverse group of stakeholders to explore this topic. From government programs to financial institutions to community organizations that support Coloradans through a wide range of economic mobility, housing, and asset building programs—you all bring distinct and valuable perspectives that can help us shape strategies to collectively build a more inclusive environment for all Coloradans to be able to thrive financially. Our Office of Financial Empowerment is defining new approaches for how the state can play a role in strengthening the financial health of its residents, and cross-sector partners—like you—are invaluable to this groundbreaking work.

This is an important moment to discuss financial inclusion. The painful reality is that too many Americans struggle financially and find themselves lacking access to credit and vulnerable to predatory lenders—both of which hold people back from upward economic mobility. To be sure, we are making important progress towards a more inclusive financial services landscape, but there is much more work to do. As an example of this progress, consider the case of the incredible growth of the Bank On movement across the country, helping to drive a nationwide decline in the number of people who don’t use or have access to a bank. In another important step forward, national and local financial institutions are re-evaluating or eliminating overdraft programs altogether and thinking more intentionally about product design for low- and moderate-income communities.

We recognize that both here in Colorado and across the country, there is more that needs to be done. There are still people who are left behind and face challenges in accessing the safe and affordable financial services essential to achieving financial stability and financial security. The data is clear that Black, Hispanic, and Indigenous people are disproportionately unbanked and underserved by mainstream financial institutions. That’s a clarion call for action and exploration as to how we can build a more inclusive and equitable banking system.

The financial status of vulnerable individuals is another challenge we must address. Consider, for example, that one report concluded that 16.3% of survivors of domestic violence have no bank account. This is over three times the national rate of those that don’t have a bank account. Furthermore, 74.1% of survivors report that they do not have a safe bank account, often because a current or former partner is monitoring, accessing, making transactions from, or otherwise controlling their bank accounts. Not being able to readily, safely, and independently access resources is a major limit to survivors’ efforts to live safely and build a better future for themselves and their families.

Documentation and identification requirements can also be a barrier to banking for a range of vulnerable communities, such as immigrants, formerly incarcerated individuals reentering their communities, and those who are housing insecure. Today, you will hear from some of our Bank On partners  working to address these issues. Indeed, as you will hear, there are companies that have concluded that serving underserved populations is not only the right thing to do, but it’s  smart business too.

We will also discuss today consumer trust in financial services. For some individuals, historical practices, such as redlining, harmed Black and other communities of color. These practices eroded trust in financial institutions and, in some cases, caused people to avoid mainstream banking. Painfully, this history and its lingering impact have contributed to a racial wealth gap where there is a wide gulf between net worth and homeownership rates among communities of color in comparison to their white counterparts.

We will hear about more of these barriers today.

The Case for Financial Inclusion

Developing relationships with mainstream financial institutions is critical to building economic opportunity. A safe and affordable bank account, like the Bank On products offered by many of our partners here, is often a critical entry point to building a better financial future. We cannot understate the importance of having a safe place to keep financial resources or access to functional money management services with affordable and predictable fee structures.

Without a bank account, consumers are more vulnerable to theft and loss, and may rely on high-cost retail financial services to manage basic transactions. Lacking a banking relationship can have a compounding effect on financial security. Unbanked and underbanked communities may have more limited access to credit and asset-building opportunities, constraining their ability to build and grow generational wealth.

So, back to financial inclusion. This group is well aware that 6% of Colorado households are unbanked. To address this challenge, we must focus on the concrete barriers we’ve already discussed, like documentation, that impact communities’ ability to open bank accounts. But let’s go beyond access alone and consider truly inclusive strategies that support financial belonging and pathways to economic opportunity. Access does not always mean inclusion. We are having similar conversations when we talk about equity and inclusion in the healthcare and education contexts.

Inclusion is about walking into a bank and feeling like you belong there. And there are a lot of people who don’t feel that way. Inclusion is about financial products that are designed in ways that are responsive to the needs of diverse communities, such as culturally responsive and multi-lingual customer service. It also means finding ways to support people who are in vulnerable situations, such as those returning home from prison, leaving dangerous situations such as an abusive home, or aging out of the foster care system.

Innovating towards Inclusion

Today we will hear from financial institutions innovating towards inclusion and about how these banks and credit unions are creating meaningful partnerships with community and government agencies to do so effectively. One of the goals of our Bank On Colorado coalition and our broader Financial Empowerment efforts is to create spaces like this and a framework for cross-sector collaboration. As this is the first in-person gathering organized by the Coalition, I am thrilled to see where this conversation takes us today.

Let’s consider some examples where there are opportunities to leverage progress in pursuit of further innovation.

We know that punitive overdraft charges have historically been a barrier to financial inclusion and financial stability, but this is changing. According to the CFPB, bank overdraft/non-sufficient funds revenue dropped by 48% between 2019 and 2022. But data from the Financial Health Network suggests that the percentage of households paying these types of fees remained unchanged and concentrated among those who are financially vulnerable. So, there is still work to be done to better serve households living paycheck-to-paycheck and this has implications for how to best meet these households short-term credit needs in responsible and transparent ways.

Colorado has recently taken action to protect consumers who face predatory lending. Our department ousted a predatory fintech lender, called EasyPay, from the state that operated using a “rent a bank” scheme. We found that EasyPay charged interest ranging from 29% to 199% on small-dollar loans ranging from $350 to nearly $5,000. The investigation found that 78% of EasyPay’s loans were at rates over 100% and more than one-third were over 168% APR. Of the consumers who did not qualify for an interest rebate promotion, more than a third of the loans defaulted. In addition, Federal law permits states to choose whether they want out-of-state, state-chartered banks to be able to import their home state’s interest rates. The General Assembly decided this session that Colorado should opt out of interest rate exportation, designed to curb rent-a-bank schemes like EasyPay. The legislation sets limits on fees that lenders can charge for loans $1,000 or less in Colorado.

There are other challenges ahead that will also require innovation and collaboration. Federal student loan payments are scheduled to resume in October. This has the potential to have an enormous impact on Coloradans’ financial stability, especially for those already living on the margins, and at a time when many rely heavily on credit cards to bridge budget gaps caused by inflation. And we know that coaching those in vulnerable situations promises to have lasting positive impacts, raising the question of how we can implement such programs more effectively. To best address these challenges we know that there are strategies we have yet to grasp that some in this room will suggest. We look forward to today’s dialogue and continuing work together.

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Access to safe banking services and other supports, like financial coaching and counseling programs, are critical to enabling economic opportunity for all. That’s why I am pleased that the partners in this room are invested in this work. I applaud the commitment that financial institutions and other stakeholders make when joining the Bank On Colorado movement.  As we will continue to explore, the barriers to financial inclusion are complex, multi-faceted, and often rooted in systems. Just as the challenges that we seek to address are diverse, so too are the experience, motivations, and perspectives that you all bring to this dialogue. I hope that that our conversations today and in the future are full of curiosity, learning, and creative problem-solving.

Thank you for taking the time to join us today.